Correlation Between Global X and IShares Fundamental

Can any of the company-specific risk be diversified away by investing in both Global X and IShares Fundamental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Global X and IShares Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Natural and iShares Fundamental Hedged, you can compare the effects of market volatilities on Global X and IShares Fundamental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Global X with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and IShares Fundamental.

Diversification Opportunities for Global X and IShares Fundamental

-0.59

Correlation Coefficient

Global X  IShares Fundamental

Excellent diversification

The 3 months correlation between Global and IShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Global X Natural and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and Global X is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Global X Natural are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of Global X i.e., Global X and IShares Fundamental go up and down completely randomly.

Pair Corralation between Global X and IShares Fundamental

Assuming the 90 days trading horizon Global X Natural is expected to under-perform the IShares Fundamental. In addition to that, Global X is 2.38 times more volatile than iShares Fundamental Hedged. It trades about -0.1 of its total potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.08 per unit of volatility. If you would invest  4,309  in iShares Fundamental Hedged on August 14, 2024 and sell it today you would earn a total of  1,360  from holding iShares Fundamental Hedged or generate 31.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Global X Natural  vs.  iShares Fundamental Hedged

Global X Natural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Natural has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares Fundamental

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, IShares Fundamental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Global X and IShares Fundamental

The main advantage of trading using opposite Global X and IShares Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, IShares Fundamental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Fundamental will offset losses from the drop in IShares Fundamental's long position.

The idea behind Global X Natural and iShares Fundamental Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.